The appellant, M/s ASP Traders, a registered dealer of red arecanut from Karnataka, consigned goods to Delhi which were detained by the Mobile Squad, Jhansi, under Section 129 of the Central Goods and Services Tax Act, 2017 (“CGST Act”). The detention was based on alleged discrepancies in documents and missing goods. A notice under Section 129(3) was issued on 21 January 2022, to which the appellant replied. Owing to business exigencies, the appellant deposited ₹7,20,440 towards IGST and secured the release of goods on 27 January 2022.

However, no final order was passed under Section 129(3). Despite repeated representations, the authorities maintained that proceedings stood concluded under Section 129(5) of the Act. The Allahabad High Court upheld this view, dismissing the writ petition filed by the appellant and holding that once payment was made and goods were released, proceedings were deemed to have concluded.

On appeal, the Supreme Court observed that every show cause notice must culminate in a reasoned, speaking order. The payment made by the appellant could not be treated as voluntary when objections were already on record. The Court emphasized that Section 129(5) does not dispense with the mandatory requirement under Section 129(3) to pass an order, which is necessary to preserve the taxpayer’s statutory right to appeal under Section 107 of the CGST Act.

The Court relied upon the CBIC Circular No. 41/15/2018-GST dated 13 April 2018, which mandates issuance of a formal order in Form GST MOV-09 and its summary in Form GST DRC-07. It held that failure to do so violates procedural fairness and Article 265 of the Constitution, as no tax or penalty can be levied or collected without authority of law.

Accordingly, the Supreme Court set aside the Allahabad High Court’s judgment and directed the concerned officer to pass a reasoned final order under Section 129(3) in Form GST MOV-09, upload its summary in Form GST DRC-07, and grant an opportunity of hearing to the appellant within one month.